Tencent had undergone many transformations since it was founded in 1998 as a simple messaging service. In 2017, it was the largest online games provider in China with a wide range of game types, China's largest social networking service provider with several of the largest social networking applications in the world, and China's favorite Internet portal. It was challenging Alibaba's Alipay as the leader in online payments systems, and it had established strategic relationships with many service providers to help exploit new opportunities in online-to-offline (O2O) services and leverage its huge user base in e-commerce and search. However, there was no room for complacency. Competition from the other big local Internet companies such as Baidu and Alibaba was fierce, and there were always thousands of start-ups looking to enter the sector. Founder and CEO Ma Huateng ("Pony" Ma) remarked, "In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share. In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China-execution is."
Swot Analysis of "Tencent" written by John R. Wells, Gabriel Ellsworth includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Tencent Ma facing as an external strategic factors. Some of the topics covered in Tencent case study are - Strategic Management Strategies, Competition, Cross-cultural management, Data, Emerging markets, Financial management, Government, Growth strategy, Internet, IT, Leading teams, Marketing, Mergers & acquisitions, Mobile, Networking, Organizational structure, Pricing, Product development, Reorganization, Risk management, Supply chain and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Tencent casestudy better are - – increasing commodity prices, central banks are concerned over increasing inflation, technology disruption, wage bills are increasing, supply chains are disrupted by pandemic , geopolitical disruptions, there is increasing trade war between United States & China,
there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Tencent case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Tencent Ma, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Tencent Ma operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Tencent can be done for the following purposes –
1. Strategic planning using facts provided in Tencent case study
2. Improving business portfolio management of Tencent Ma
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Tencent Ma
Strengths Tencent | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Tencent Ma in Tencent Harvard Business Review case study are -
Training and development
– Tencent Ma has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Tencent Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Superior customer experience
– The customer experience strategy of Tencent Ma in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Tencent Ma has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Tencent Ma has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Learning organization
- Tencent Ma is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Tencent Ma is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Tencent Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Tencent Ma has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Tencent HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Tencent Ma is present in almost all the verticals within the industry. This has provided firm in Tencent case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of Tencent Ma
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Tencent Ma does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Tencent Ma has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Tencent Ma to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Tencent Ma has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Sustainable margins compare to other players in Strategy & Execution industry
– Tencent firm has clearly differentiated products in the market place. This has enabled Tencent Ma to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Tencent Ma to invest into research and development (R&D) and innovation.
Analytics focus
– Tencent Ma is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by John R. Wells, Gabriel Ellsworth can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to recruit top talent
– Tencent Ma is one of the leading recruiters in the industry. Managers in the Tencent are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses Tencent | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Tencent are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Tencent, it seems that the employees of Tencent Ma don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Increasing silos among functional specialists
– The organizational structure of Tencent Ma is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Tencent Ma needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Tencent Ma to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Tencent Ma has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Capital Spending Reduction
– Even during the low interest decade, Tencent Ma has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
No frontier risks strategy
– After analyzing the HBR case study Tencent, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Tencent Ma is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Tencent can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Tencent, in the dynamic environment Tencent Ma has struggled to respond to the nimble upstart competition. Tencent Ma has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Low market penetration in new markets
– Outside its home market of Tencent Ma, firm in the HBR case study Tencent needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Tencent Ma has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Tencent Ma even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Slow to strategic competitive environment developments
– As Tencent HBR case study mentions - Tencent Ma takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Products dominated business model
– Even though Tencent Ma has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Tencent should strive to include more intangible value offerings along with its core products and services.
Opportunities Tencent | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Tencent are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Tencent Ma can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Tencent Ma has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Tencent Ma can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Tencent Ma can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Using analytics as competitive advantage
– Tencent Ma has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Tencent - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Tencent Ma to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Tencent Ma can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Creating value in data economy
– The success of analytics program of Tencent Ma has opened avenues for new revenue streams for the organization in the industry. This can help Tencent Ma to build a more holistic ecosystem as suggested in the Tencent case study. Tencent Ma can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Tencent Ma can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Tencent suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Tencent Ma can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Tencent, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Tencent Ma can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Tencent Ma to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Tencent Ma to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Tencent Ma can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Tencent Ma in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Tencent Ma in the consumer business. Now Tencent Ma can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Tencent External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Tencent are -
Consumer confidence and its impact on Tencent Ma demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High dependence on third party suppliers
– Tencent Ma high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Tencent Ma in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Tencent Ma with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Tencent Ma in the Strategy & Execution sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Tencent Ma can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Tencent .
Technology acceleration in Forth Industrial Revolution
– Tencent Ma has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Tencent Ma needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Tencent, Tencent Ma may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing wage structure of Tencent Ma
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Tencent Ma.
Stagnating economy with rate increase
– Tencent Ma can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Tencent Ma needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Tencent Ma.
Weighted SWOT Analysis of Tencent Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Tencent needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Tencent is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Tencent is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Tencent is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Tencent Ma needs to make to build a sustainable competitive advantage.